Geographical heterogeneities and externalities in an epidemiological‐macroeconomic framework

Abstract

We analyze the implications of geographical heterogeneities and externalities on health and macroeconomic outcomes by extending a basic epidemiological-macroeconomic model to a spatial dimension. Because of people's migration and commuting across different regions, a disease may spread also in areas far from those in which the outbreak originally occurs and thus the health status (i.e., disease prevalence) in specific regions may depend on the health status in other regions as well. We show that neglecting the existence of cross-regional effects may lead to misleading conclusions about the long run outcome not only in single regions but also in the entire economy, suggesting that single regions need to coordinate their efforts in order to achieve disease eradication. We analyze such a coordination by focusing on a control problem in which the social planner determines globally the level of intervention showing that in order to achieve eradication it is essential to accompany traditional disease control policies (i.e., prevention and treatment) with regulations limiting people's movements. Focusing on COVID-19 we present a calibration based on Italian data showing that, because of the infections generated by cross-regional commuting, even vaccination may not be enough to achieve disease eradication, and limitations on people's movements need to accompany vaccination in order to preclude COVID-19 from reaching an endemic state.

Introduction to the special issue on new insights into economic epidemiology: Theory and policy

“…La Torre et al (2022) tackle the same basic policy question, namely, the design of epidemic control polices, say, at the global level internalizing spatial externalities. A key difference with Rothert (2021) is that they take up the challenge of explicitly modeling the corresponding spatiotemporal dynamics and the associated optimization problem.…”

“…Network modeling in mathematical and applied epidemiology is not new (see a recent contribution due to Karaivanov, 2020), and typically captures the fact that infections are first of all spreading in individuals' social networks. Freiberger et al's work captures interaction aspects at other levels, namely, the regional scale, and can be considered as such as an alternative to the spatiotemporal modeling discussed above (La Torre et al, 2022). The second paper by Hritonenko et al (2021) introduces transmission delays into a SIR epi-econ model and derives theoretical and policy implications.…”

“…In an important economic contribution, Barrett (2003) has already outlined the crucial role of coordination/coordination in the eradication of epidemics, but he has also added that beyond coordination, there is a need for “strong institutions.” This section of this special issue proposes two contrasted contributions to this topic. The two contributions build on two complementary frameworks for the analysis of spatial externalities in an outbreak context: one deals with the associated strategic aspects in a static model (Rothert, 2021), and the other solves a first‐best spatiotemporal problem of epidemic control (La Torre et al, 2022).…”

“…This section of this special issue proposes two contrasted contributions to this topic. The two contributions build on two complementary frameworks for the analysis of spatial externalities in an outbreak context: one deals with the associated strategic aspects in a static model (Rothert, 2021), and the other solves a first-best spatiotemporal problem of epidemic control (La Torre et al, 2022). 1 1 These externality problems are very close in nature to those involved in transboundary pollution, though the "infection" mechanisms are different.…”

Epidemics, vaccines, and health policy

“…The next two studies are of a macroeconomic nature and make use of overlapping generations general equilibrium settings. As such, they join a number of articles published in the previous Special Issue on the same general topic, namely Gori et al (2022), La Torre et al (2022; as well as studies that evaluate the performance of specific policies aiming at epidemic control, such as Iverson et al (2022), Gallic et al (2022), Hellmann andThiele (2022), and Hritonenko and Yatsenko (2022). Davin et al (2023) develop the first dynamic (overlapping-generations [OLG]) general equilibrium model where fully specified epidemic infection dynamics intersect with a pollution health externality to jointly determine long-term health and economic outcomes.…”